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Kensey Nash CEO Discusses F4Q10 Results - Earnings Call Transcript

Kensey Nash CEO Discusses F4Q10 Results - Earnings Call Transcript

Kensey Nash Corp. (KNSY)

F4Q10 (Qtr End 06/30/2010) Earnings Call

August 23, 2010 9:00 am ET


Joseph Kaufmann - President and CEO

Mike Celano - CFO

Doug Evans - COO


Dave Turkaly - SIG

James Sidoti - Sidoti & Company

Josh Jennings - Jefferies & Company

Bill Plovanic - Canaccord



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» Kensey Nash Corporation F3Q09 (Qtr End 3/31/09) Earnings Call Transcript

Welcome to the Kensey Nash fourth quarter and fiscal year earnings release. (Operator Instructions) I'll turn the conference over to the President and CEO, Mr. Joseph Kaufmann.

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Joseph Kaufmann

Thank you. Good morning, everyone. Welcome to the Kensey Nash fiscal fourth quarter 2010 conference call. Joining me today are Doug Evans, our Chief Operating Officer; and Mike Celano, our CFO. First, we can get started with the Safe Harbor.

Mike Celano

The statements made by Kensey Nash and its representatives in this conference call will contain certain forward-looking statements, including financial forecasts that are based on the current beliefs of management as well as assumptions made by and information currently available to management. Wherever possible, we will try to identify these forward-looking statements by using words such as belief, expect, anticipate, forecast, and similar expressions. Please note these words are not the exclusive means for identifying such statements.

Please see today's press release and Kensey Nash's SEC filings, including our Annual Report on Form 10-K for the year ended June 30, 2009, and other fiscal year Form 10-Qs, particularly the information under the caption "Risk Factors" for the discussion of risks, uncertainties and other factors that could cause actual results in fiscal year '11 and beyond to differ materially from those expressed in or implied by our forward-looking statements.

Joseph Kaufmann

Thank you, Mike. Well, I'm very pleased to report excellent financial results for our fourth quarter today, a quarter in which we achieved record sales of $15.1 million and record adjusted EPS of $0.54 per share. I would like to thank our employees for another great job in not only the current quarter, but throughout our fiscal year 2010.

My remarks today regarding EPS will be referencing the adjusted EPS of $0.54 for the quarter and $0.85 for the fiscal year 2010. Details of the reconciliation from adjusted EPS to reported EPS are available in the press release.

Our total revenue for the quarter of $21.9 million exceeded prior year by 7% and increased 10% sequentially. Total net sales of $15.1 million exceeded prior year by 12% and increased 14% sequentially. This growth was due to sports medicine, which increased 58% year-over-year and 9% sequentially; and our cardiology products, which are primarily Angio-Seal components, also increased 14% year-over-year and 3% sequentially.

In addition, we shipped our initial XCM Biologic products to our new partner Synthes for their initial launch in the U.S., which is taking place in the first quarter of fiscal year '11. So all these items contributed to an outstanding quarter for Kensey Nash.

Partially offsetting this growth year-over-year was a 9% decline in our spine products; however, these products did increase 37% sequentially from the very weak third quarter. The spine business reflects an overall weakness in this market, as I'm sure most of you are aware of by the reporting of other companies in this space. And in particular, it has impacted one of our key strategic partners.

As you may know, Orthovita, our partner, with the VITOSS products and the VITOSS Bone, has announced recently they will be refocusing their sales efforts on our co-developed products. And we are hopeful this will result in an improvement in sales in the second half of our fiscal year 2011.

Royalty income of $6.8 million was 3% below prior year and increased 1% sequentially. Angio-Seal royalties of $5.3 million were essentially flat year-over-year and sequentially. And Orthovita royalties of $1.4 million decreased 10% year-over-year, but were flat sequentially.

Earnings per share of 54% increased 32% year-over-year and 17% sequentially. And for the total year, EPS of $1.85 increased 9%. This reflects not only the improvements that we've made throughout the year in our cost structure, but also the growth of our new businesses in the regenerative medicine space and the fact that this gets the company in a position for outstanding growth looking out over the next five years within our organization.

We have refocused the company in this biologic space, and we're very happy with the progress our teams have made in R&D and clinical area and in the manufacturing space, as we're in a great situation today not only for fiscal year 2011, but certainly beyond with all the products that we have in the pipeline and the strategic partnerships that we currently have in place, but also some new ones that we anticipate will happen in fiscal year 2011.

If you look at our balance sheet, the operating cash flow for the quarter was $10.9 million and for the year was a little bit over $30 million. CapEx was approximately $3 million for the year. And free cash flow prior to our stock repurchase program was approximately $27 million. As of June 30, 2010, cash and investments totaled $65 million, and this is after stock repurchases for the year of $41 million.

Moving on to our guidance for the first quarter and fiscal year 2011, we expect total revenues for fiscal year 2011 within a range of $81 million to $83 million. Net sales and royalties are expected to be in the ranges of $54 million to $55.5 million and $27 million and $27.5 million respectively.

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